You Need to Know This If You Have Commissioned Salespeople in Texas

Almost all employers who use commissioned salespeople have an understanding with them regarding how commissions are earned; some even put this agreement into writing. Unfortunately, many do not state specifically when employees stop earning commissions. This can lead to expensive, unintended consequences in Texas.

Last month, the Texas Supreme Court in Perthuis v. Baylor Miraca Genetics Lab’ys, LLC, breathed new life into an old doctrine (the “procuring-cause” doctrine) that originally dealt with real estate broker commission agreements. In Perthuis, the court held that an at-will employee who receives a commission as part of his compensation continues to earn commissions on sales consummated after the employee’s termination if:   

  1. The employee was the “procuring cause” of the sales, and 
  2. The commission agreement between the employer and employee “is silent about any exceptions.”

 The commission agreement that was being litigated in Perthuis was very simple: “Your commission will be 3.5% of your net sales.” The agreement did not define “net sales” or put any other limitations on the commissions. 

Perthuis negotiated a contract with his employer’s largest customer to increase its minimum purchase obligations. The employer subsequently fired Perthuis and refused to pay him any further commissions. Perthuis sued, arguing that he was the procuring cause of the sales and that in the absence of language to the contrary in his commission agreement, under the procuring-cause doctrine he was entitled to commissions on sales made long after his employment with his employer ceased. 

The Trial court and jury agreed and awarded Perthuis over $1 million in damages and interest. The Texas Supreme Court agreed with the trial court – holding that the “procuring-cause doctrine” provides a default rule for any “agreement to pay a commission on a sale” that does not contain terms that “are inconsistent with the default rule.”  

Employer takeaway:  

Unless employers include sufficient language in their commission agreements, the procuring-cause doctrine will apply by default, and they may owe Texas employees commissions on sales consummated years after the employees’ employment ceases. To avoid this, employers should closely review their commission agreements and revise them as soon as possible.  As always, I will be happy to assist you in any way possible. 

2022 Legislative Update

As you are no doubt aware, the 2022 Regular Legislative Session ended on Monday, June 6. Some new laws relevant to the HR professional made it out of the session, as did some interesting, but not-so-relevant ones. Outlined below are some of the most significant.

Bills of Interest to HR

House Bill 54. (This Bill will become law if not vetoed by 6/26.) This law will prohibit any governmental entity or public educational institution from seeking proof of vaccination status from anyone seeking entry or discriminating against an employee for refusing to adhere to a COVID vaccination requirement.

House Bill 988. (This Bill will become law if not vetoed by 6/23.) This law will prohibit a public employer from discriminating against any employee or applicant based solely on a positive drug test for marijuana if the employee or applicant has been diagnosed as suffering from a debilitating medical condition and a licensed physician has recommended marijuana for therapeutic use.

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Do You Hear That Sound? It’s The Paid Leave Train, And It’s Heading Straight for You

Most of us are very familiar with the Family and Medical Leave Act, which requires unpaid leave, a continuation of benefits, and reinstatement of employees who take off of work for various health and military-leave related reasons. 

Fortunately, the FMLA only applies to employers with fifty or more employees, and we currently have no comparable state law that would apply to smaller employers.  

That is probably going to change in the near future. 

This week, Maryland became the tenth state to recently pass a law requiring private employers to provide paid family and medical leave. Similar bills are currently pending in at least twenty-five other states, including Louisiana. 

Louisiana currently has no less than two Bills pending in the House and Senate that would require private employers to provide paid leave for sickness, and family and parental leave, and one that would require governmental employers to provide similar paid leave benefits. The Bills would variously apply to employers with at least five or twenty employees, and one would apply to state employees. (Senate Bill 289, House Bill 1003, and House Bill 945 respectively). Although employers do not need to take any concrete action in response to any of these Bills at this time, it would be a good idea to keep them on your radar. If any of these become law, they will present significant changes.

Department of Labor Issues Field Assistance Bulletin Showing Emphasis on Retaliation 

On March 10 the U.S. Department of Labor issued Field Assistance Bulletin No. 2022-02: Protecting Workers from Retaliation (“FAB”).

In the FAB, the DOL identified several actions that can constitute retaliation. This is significant because the FAB shows that the DOL intends to be very broad in its application of the retaliation provisions. 

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Proposed Bill Would Prohibit the Use of Non-Compete Agreements with Certain Physicians

Senator Jay Morris has proposed a Bill that will significantly limit the use of employment-related agreements that limit a primary care physician’s ability to practice medicine. Senate Bill 385 would prohibit the use of any employment contract or agreement to restrict the practice of medicine by a licensed primary care physician, except for certain limited situations.

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President Biden Signs Law Limiting Arbitration Agreements for Sexual Harassment

You may recall that a couple of weeks ago I sent out an update that the Senate had passed a bill that would severely limit the use of forced arbitration agreements and class action waivers covering allegations of sexual harassment.  Well, President Biden signed the Bill into law last Friday, the 3rd.

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 is now law.  The Act amends the Federal Arbitration Act by adding a new section:

[A]t the election of the person alleging conduct constituting a sexual harassment dispute or a sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no pre-dispute arbitration agreement or pre-dispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.

The Act allows employees to void portions of arbitration agreements requiring them to arbitrate sex assault/harassment claims

The Act does not affect agreements to arbitrate claims other than sex harassment/assault.

The Act applies to all claims arising after March 3, 2022, the day that it was signed by President Biden.

Bottom line: If you have agreements requiring your employees to submit issues to binding arbitration rather than suing you, the Act only applies to them to the extent that they require the arbitration of sexual harassment and sexual assault claims.  If you were thinking of implementing an arbitration agreement to avoid employment-related class actions, among other things, you can still do so – just not sex assault/harassment claims.

Call me directly if you want to discuss the ins and outs of employment arbitration agreements.  

The CDC Has Relaxed It’s Face Covering Recommendations, And This Should Matter to You

 As we discussed in prior updates, when OSHA withdrew its Emergency Temporary Rule requiring large employers to vaccinate or test their employees, it indicated that it was going to ensure that workplaces were COVID – safe by using the General Duty Clause.  The General Duty Clause requires employers to provide a work environment “free from recognized hazards that are causing or are likely to cause death or serious physical harm.”  COVID is a recognized hazard that is causing or likely to cause death or serious physical harm. 

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Congress Passes Ban on Arbitration Clauses for Sex Harassment and Sex Assault Claims – Bill Goes to Biden for Signature

The U.S. Senate joined the House of Representatives and passed H.R. 4445. This Act will give the claimant the ability to void any agreement requiring the arbitration of sexual harassment and sexual assault claims. The Act also voids any agreement containing a class action waiver of these types of claims. 

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Recent Federal Court Ruling on ADA Claim Emphasizes Importance of Engaging In and Documenting the Interactive Process

A federal court in Ohio recently denied summary judgment to an employer who refused to hire an applicant for a forklift driving position who used prescription opioid medication. The court determined that there were fact issues regarding whether the employer properly engaged in the interactive process and whether the applicant’s opioid use rendered him unsafe to perform the job.

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